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Oil Price Outlook: Crude Breakout Vulnerable at Multi-year Resistance

Oil Price Outlook: Crude Breakout Vulnerable at Multi-year Resistance

Michael Boutros, Strategist

Crude Oil Technical Forecast: WTI Weekly Trade Levels

  • Crude Oilupdated technical trade levels – Weekly Chart
  • WTI breakout extends into multi-year trend resistance– rally may be vulnerable sub-62
  • New to Oil Trading? Get started with this Free How to Trade Oil-Beginners Guide

Oil prices have surged more than 29% since the start of the 2021 with WTI attempting to mark a fourth consecutive weekly advance to fresh yearly highs. The rally takes price into critical multi-year trend resistance and leaves the immediate rally vulnerable while below this threshold- on the lookout for inflection in the days ahead. These are the updated targets and invalidation levels that matter on the oil price weekly chart. Review my latest Strategy Webinar for an in-depth breakdown of this crude oil price setup and more.

Crude Oil Price Chart – WTI Weekly

Crude Weekly Chart

Chart Prepared by Michael Boutros, Technical Strategist; Crude Oil (WTI) on Tradingview

Notes:In my last Oil Price Outlook we noted that the WTI was approaching multi-year slope resistance and that, “pullbacks should be limited to the monthly open IF price is indeed heading higher with a close above this trendline keeping the focus on key resistance into the 2008 trendline.” The rally continued for another two weeks before finally tagging the 2008 trendline this week with price poised to close a fourth weekly advance into confluence resistance.

A narrow ascending channel formation has continued to guide the advance off the November lows with oil prices now testing confluence lateral resistance at the 2020 high-week reversal close / 61.8% Fibonacci extension at 59.16-60.66. A breach / weekly close above this threshold is needed to keep the long-bias viable with such a scenario exposing subsequent resistance objectives 64.40-65.92- look for a larger reaction there IF reached. Initial support rests at the channel (currently ~56.50s) backed by the 2017 opening-range highs at the 55-handle. Ultimately, a break below the objective February open at 52.16 would be needed to suggest a more significant high is in place.

Bottom line: The crude oil rally may be vulnerable in the days ahead as price extends into multi-year trend resistance. From at trading standpoint, a good zone to reduce long-exposure / raise protective stops – be on the lookout for possible topside exhaustion while below this week’s highs IF a correction is on the cards with a break below 55-needed to shift the near-term focus lower again. Ultimately, a close above this slope would likely fuel another accelerated advance in oil prices towards the 65-handle.

For a complete breakdown of Michael’s trading strategy, review his Foundations of Technical Analysis series on Building a Trading Strategy

Crude Oil Trader Sentiment – WTI Price Chart

Crude Sentiment
  • A summary of IG Client Sentiment shows traders are net-short crude oil - the ratio stands at -1.03 (49.38% of traders are long) – typically neutral reading
  • Long positions are 19.98% higher than yesterday and 7.93% higher from last week
  • Short positions are19.03% lower than yesterday and 16.45% lower from last week
  • We typically take a contrarian view to crowd sentiment, and the fact traders are net-short suggests Oil - US Crude prices may continue to rise. Yet traders are less net-short than yesterday and compared with last week. Recent changes in sentiment warn that the current Oil - US Crude price trend may soon reverse lower despite the fact traders remain net-short. standpoint.


Previous Weekly Technical Charts

--- Written by Michael Boutros, Technical Strategist with DailyFX

Follow Michael on Twitter @MBForex

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.